In Zone Brands, Inc. v. United States

• Decision Date: 05 May 2020
• Docket Number: Slip Op. 20-59,Court No. 17-00025
• Citation: 456 F.Supp.3d 1309
• Parties: IN ZONE BRANDS, INC. and Good2Grow, Inc., Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

456 F.Supp.3d 1309

IN ZONE BRANDS, INC. and Good2Grow, Inc., Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 20-59

Court No. 17-00025

United States Court of International Trade.

May 5, 2020

Daniel G. Jarcho, Kyle G. A. Wallace, Jason M. White, Brian W. Lutz, and Chulian Yang Allston & Bird LLP, of Washington, D.C. for the Plaintiffs, In Zone Brands, Inc. and Good2Grow, Inc.

Peter A. Mancuso, Trial Attorney, Civil Division, U.S. Department of Justice, of Washington, D.C., for the Defendant, the United States of America. With him on the brief were Joseph H. Hunt, Assistant Attorney General, U.S. Department of Justice and Justin R. Miller, Attorney-in-Charge, International Trade Field Office, Civil Division, U.S. Department of Justice, Commercial Litigation Branch. Of Counsel on the brief was Michael W. Heydrich Attorney, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, of New York, N.Y.

OPINION

Restani, Judge:

Plaintiffs In Zone Brands, Inc. ("In Zone") and Good2Grow, Inc. ("Good2Grow") brought this action contesting U.S. Customs and Border Protection's ("Customs") tariff classification of the subject merchandise. The merchandise at issue ("bottle toppers") depict the heads and/or busts of popular children's characters such as Iron Man, Thor, Sponge Bob, Angry Birds, Care Bears, Ariel, and Paw Patrol, fastened to a screw-top straw and base made for use with Plaintiffs’ children's beverages. In cross-motions for summary judgment, Plaintiffs argue that the bottle toppers are properly classified as toys under Heading 9503 of the Harmonized Tariff Schedule of the United States ("HTSUS") and the government argues that Customs properly classified the bottle toppers under as "stoppers, lids, caps and other closures" under Heading 3923.50. For the reasons stated below, the government's motion is granted and Plaintiffs’ motion is denied.

I. BACKGROUND

The bottle toppers were imported between January 9, 2013, and August 16, 2014. Def.’s Statement of Undisputed Material Facts ¶ 3 ("Def. Facts"); Pl.’s Resp. to Def.’s Statement of Undisputed Material Facts ¶ 3 ("Pl. Resp. Facts"). At liquidation, Customs classified the merchandise under subheading 3923.50.00, HTSUS (2013),¹ which provides for "Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Stoppers, lids, caps and other closures." Pl.’s Statement of Material Facts Not in Dispute ¶ 85 ("Pl. Facts"); Def.’s Resp. to Pl.’s Statement of Undisputed Material Facts ¶ 85 ("Def. Resp. Facts"). Good2Grow² timely protested, averring that the bottle toppers were properly classified under 9503.00.00, HTSUS as "Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-scale (‘scale’) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof." Pl. Facts ¶¶ 86–87; Def. Resp. Facts ¶¶ 86–87. Although a protest at the Port of Atlanta was approved, Customs then issued HQ H264771, which led to the denial of protests at the Ports of Tampa and Jacksonville. Pl. Facts ¶¶ 88–91; Def. Resp. Facts ¶¶ 88–91. Good2Grow appealed these denials. The parties filed cross-motions for summary judgment and supporting briefs arguing their respective positions. See Def.’s Mot. for Summ. J. & Mem. in Supp. of Mot. for Summ. J., ECF No. 51 (June 28, 2019) ("Def. Br."); Pl.’s Cross-Mot. for Summ. J. & Mem. of Law in Resp. to Def.’s Mot. for Summ. J. & in Supp. of Pl.’s Cross-Mot. for Summ. J., ECF No. 70 (Nov. 8, 2019) ("Pl. Br.").

The following facts are undisputed. The bottle toppers are three-dimensional molded plastic figures made to resemble various licensed characters³ that can be affixed to a spout with a valve and threaded base made to screw onto Good2Grow juice bottles.⁴ Pl. Facts ¶ 5; Def. Resp. Facts ¶ 5. The spout, valve, and threaded base (the "forecap"), Def. Facts ¶ 14; Pl. Resp. Facts ¶ 14, complies with applicable U.S. Food and Drug Administration ("FDA") standards for beverage use. Def. Facts ¶ 22; Pl. Resp. Facts ¶ 22. Additionally, the bottle toppers also comply with toy-specific standard ASTM F963-11 for choke testing. Pl. Facts ¶ 53; Def. Resp. Facts ¶ 53. The bottle toppers are reusable, dishwasher safe, and spill-proof due to a one-way valve. Def. Facts ¶¶ 11, 13; Pl. Resp. Facts ¶¶ 11, 13. Good2Grow juice bottles are hermetically sealed with foil, which is removed prior to consumption. Pl. Facts. ¶ 17; Def. Resp. Facts ¶ 17. Good2Grow primarily targets children ages ten and younger, who comprise the majority of consumers. Pl. Facts ¶¶ 8–9; Def. Resp. Facts ¶¶ 8–9. The bottle toppers are, at times, sold without the juice bottle online, but most often are sold in retail locations (such as grocers, convenience stores, mass merchants, and drug stores) with the juice bottle included. Def. Facts ¶¶ 30, 43; Pl. Resp. Facts ¶¶ 30, 43; Pl. Facts ¶ 24; Def. Resp. Facts ¶ 24.

II. JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction under 28 U.S.C. § 1581(a) (2012).⁵ The court will grant summary judgment if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." USCIT R. 56(a). Summary judgment is appropriate in tariff classification cases where "there is no genuine dispute as to the nature of the merchandise and the classification turns on the proper meaning and scope of the relevant tariff provisions." Deckers Outdoor Corp. v. United States, 714 F.3d 1363, 1371 (Fed. Cir. 2013). The Court decides classification de novo. See 28 U.S.C. § 2640 (a)(1) ; Telebrands Corp. v. United States, 865 F. Supp. 2d 1277, 1279–80 (CIT 2012).

III. DISCUSSION

a. Legal Framework

The plaintiff has the burden of demonstrating that the government's classification is incorrect, but the court has an independent duty to determine the correct classification. See Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed. Cir. 1984). The meaning of a tariff term is a question of law and whether subject merchandise falls under a given tariff term is a question of fact. See Wilton Indus. v. United States, 741 F.3d 1263, 1265–6 (Fed. Cir. 2013) (citations omitted). The General Rules of Interpretation ("GRIs") and, if applicable, the Additional U.S. Rules of Interpretation ("ARIs"), guide classification decisions under the HTSUS. Id. at 1266. The court applies the GRIs in numerical order and only continues to a subsequent GRI if "proper classification of the imported goods cannot be accomplished by reference to a preceding GRI." Id. GRI 1 requires classification to "be determined according to the terms of the headings and any relative section or chapter notes." GRI 1 (2013). HTSUS chapter and section notes are considered binding statutory law. See BenQ Am. Corp. v. United States, 646 F.3d 1371, 1376 (Fed Cir. 2011). Once the correct heading is identified, the court determines which subheading correctly identifies the merchandise in question. Orlando Food Corp. v. United States, 140 F.3d 1437, 1440 (Fed. Cir. 1998) (citing GRI 1, 6).

b. Competing Tariff Provisions

The government classified the bottle toppers under subheading 3923.50.00, HTSUS at 5.3% ad valorem. The relevant portions of Chapter 39 of the HTSUS read:

3923 Articles for the conveyance or packing or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics:

3923.50.00 Stoppers, lids, caps and other closures.

Good2Grow contends that the bottle toppers should enter free of charge under subheading 9503.00.00, HTSUS, as:

9503.00.00 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced-scale ("scale") models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof.

Although the bottle toppers may be properly classified under 3923.50.00, the court must first assess whether they are properly classified under 9503.00.00, HTSUS because Note 2(y) to Chapter 39 specifically excludes "[a]rticles of chapter 95 (for example, toys, games, sports equipment)." Note 2(y) to ch. 39, HTSUS. Turning to Chapter 95, however, the court is met with another note that the government argues must be considered before the relevant heading.

c. Note 1(v) to Chapter 95

The government argues that Note 1(v)⁶ to Chapter 95 precludes classification of the bottle toppers as toys under Heading 9503. Def. Br. at 11–13. Note 1(v) excludes from classification under Chapter 95:

Tableware, kitchenware, toilet articles, carpets and other textile floor coverings, apparel, bed linen, table linen, toilet linen, kitchen linen and similar articles having a utilitarian function (classified according to their constituent material).

Note 1(v) to ch. 95, HTSUS. Good2Grow avers that Note 1(v) is of limited application meant to exclude "traditional utilitarian items decorated with a holiday motif" from classification under Chapter 95. Pl. Br. at 13. Further, Good2Grow notes that a footnote to Note 1(v) directs one to subheading 9817.95,⁷ which allows duty-free entry of certain "utilitarian articles" used in relation to a "religious or cultural ritual" or holiday. Id. at 12 (citing 9817.95, HTSUS). The government responds that Good2Grow's reading is contrary to the text, which is not so limiting, and that the cases Good2Grow cites do not support its interpretation of Note 1(v). See Mem. of Law in Resp. to Pl.’s Cross-Mot. for Summ. J. & in Further Supp. of the Gov't's Mot. for Summ. J., ECF No. 61, at 8–9 (Oct. 7, 2019) ("Def. Reply"). In reply, Good2Grow argues that the government misapplies the ejusdem generis canon and overreads the breadth of Note 1(v). Pl.’s Reply to Def.’s Resp. to Pl.’s Cross-Mot. for Summ. J., ECF No. 65, at 1–2 (Nov. 4, 2019). ("Pl. Reply"). Further, Good2Grow contends that Customs’ stance during the United States International Trade Commission ("ITC") Investigation No. 1205-6 estops the government from...